Underwriting And Cost Of Industrial Life Insurance

Other characteristics of industrial life insurance include more liberal underwriting standards and higher cost. Underwriting is more liberal in that no medical examination is required, all members of the family are insured, and many applicants who would be classified as high risks under ordinary policies are accepted as standard risks under industrial contracts. The cost is higher than ordinary insurance for several reasons: 

1. More liberal underwriting results in higher mortality.
2. Lower-income groups are the main purchasers, and they tend to have higher mortality rates.
3. Administrative costs are higher on a per policy basis because of the fixed costs of handling and processing the contract and the costs of the weekly or monthly premium collection.
4. Lapse rates are higher because of the greater frequency of required premium payments and because unexpected expenses tend to have a greater impact on the lowerincome workers’ ability to pay premium. 

Less than 3 percent of life insurance in force is industrial life insurance and this figure is decreasing every year. This decline is due mainly to the economic gains of the American worker enabling him/her to purchase higher amounts of insurance.